Czech Inflation Now In Single Digits, Holiday Packages Add Noise

Sell-side desks react to Czech inflation data, which were in line with BBG consensus but undershot the CNB's projections:

• Czech Banking Association Chief Economist Jakub Seidler writes that the main driver of M/M price growth was the increase in holiday prices due to the start of the summer season, with Y/Y inflation falling on the back of base effects.
• J&T Banka Chief Economist Petr Sklenar also points to a high comparative base, adding that there has been broader stabilisation in price developments. He says that the CNB is managing to tame inflation, but the risk is that inflation will only slow to +4-5% Y/Y next year. He points to an 8% Y/Y decline in import prices and says that without the strong CZK exchange rate the decline would be half that large.
  
• JP Morgan write that "in seasonally-adjusted terms, CPI was up just 0.1% M/M, making June the third consecutive month in which inflation momentum runs at a level within the CNB's target." They argue that "not even CNB can hawk-spin these data." They maintain their call for a first CNB rate cut in February 2024, while seeing a risk of a cut late this year.
  
• ING expect inflation to ease further to +8.6% Y/Y in July, with the pace of disinflation set to slow going forward. They do not think today's print will be a game-changer for the CNB and expect the central bank to wait with cutting rates until the November meeting, with the risk of a delay until 1Q2024.